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New Monaco family offices law creates two categories of MFOs

By: Adrien Paredes-Vanheule | 30 Nov 2016

The National Council of Monaco – the Monegasque parliament – yesterday passed a law that aims to regulate the activity of multi-family offices in the Principality, by creating two categories of MFOs.

The new law comes as Monaco is looking to renew its wealth management business model, at a time when private banks around the world are under pressure, and high-net-worth individuals and UHNWIs are increasingly making use of family offices and multi-family offices to manage their assets.

The law followed a consultation period, during which the Monegasque government sought, unsuccessfully, to allow banks and asset managers to establish MFOs in the Principality, and to be able to manage portfolio. These were deemed by the National Council lawmakers to potentially create a risk for conflicts of interest to exist.

Two categories

The first of the two new MFO categories will provide for entities that are able to focus on asset administration only, without the ability to process financial transactions; the second category will be able to transmit financial orders as well as to provide financial advice to their clients.

Before they will be allowed to operate in Monaco, those MFOs in the latter category will need to be authorised by both the Monegasque regulator – the Commission de Contrôle des Activités Financières (CCAF) – and the Monegasque government, in addition to possessing starting capital of €300,000.

Thierry Crovetto, the rapporteur of the new MFO law as well as chief executive and independent fund analyst at TC Stratégie Financière, told International Investment‘s sister publication, InvestmentEurope, that the new law would “spur foreign residents of Monaco to favour local MFOs [over] those of their countries of origin”.

“It is estimated that only 10% of the assets of Monaco’s foreign residents are currently deposited in banks established in the Principality,” Crovetto added.

“There is a huge potential to explore here.”

Crovetto called attention to what he called “a few legal safeguards” that the law lays down. One is that any remuneration that arises out of the MFO arrangements with their clients “will be that pertaining to clients only”.

In addition, banks and asset managers will not be permitted to be majority shareholders of any Monegasque MFOs. Explained Crovetto: “We do not want to see asset managers selling their products through the set-up of MFOs in Monaco.”

To read more about Monaco’s new law on multi-family offices, see the December 2016/January 2017 issue of InvestmentEurope, the website of which this article first appeared on.

To read an earlier InvestmentEurope article about the new MFO law, when the consultation was first announced in February, click here.

Helen Burggraf is Chief Correspondent for International Investment. She is a US-trained journalist who has worked in Rome, New York City and London, covering among other things the fashion and retailing industries, the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.